Energy stocks may be the most-cursed securities since the last one-year period, but not all is repulsive in this corner of the investment world. Investors should note that energy stocks are known for warm dividend payouts.
Energy companies normally emphasize higher capital expenditure for production growth, and focus less on profitability. However, these companies started to focus more on profitability generation and dividend distribution since the recession in order to ensure more stable cash inflows, per CNBC .
CNBC indicates that a steady and rising dividend profile allures investors toward a stock which in turn inflates that company's asset valuation. With crude prices being nearly halved since last year and many of the energy stocks falling by the wayside, dividends remained the only appeal and the only point of certainty for the space (read: Short Oil ETFs in Focus as Crude Prices Keep Falling ).
At the current level, oil prices do not promise much enthusiasm in the horizon and the Iran nuclear deal prepares to add to the global supply gut. So investors can hardly rely on the long-term fate of the oil companies. However, they should note that energy stocks and the related ETFs were beaten down in the last one year and now offer great bargains. So, anybody interested in bottom fishing in the energy space, dividends might increase their return on investment (read: 4 ETFs in Focus As Iran Reaches Nuclear Deal ).
This was more so given the Fed's indication of a rate hike sometime later in 2015 which will push up the long-term bond yields. So, energy ETFs yielding in excess of the benchmark U.S. treasury note might entice some investors looking for a high-yield option in the energy area. Below we highlight three global energy ETFs that are rich in dividends:
Canadian Energy Income ETF (ENY)
This fund follows the Sustainable Canadian Energy Income Index, holding 48 stocks in its portfolio. It is well diversified across its holdings with none of the companies accounting for more than 5.58% of total assets.
The ETF is unpopular with just $37.5 million in assets and trades about 25,500 shares per day. It charges 71 bps in annual fees and expenses. The product has lost about 25% so far this year (as of July 22, 2015). The fund yields 4.15% annually (see: all the energy ETFs here ).
SPDR S&P International Energy Sector ETF (IPW)
This fund provides exposure to the energy companies of developed markets excluding the U.S. by tracking the S&P Developed Ex-U.S. BMI Energy Sector Index. It is less popular and illiquid with AUM of $24.6 million and average daily volume of less than 10,000 shares. The ETF charges 40 bps in fees per year from investors.
In total, the fund holds about 140 securities in its basket. About 92.9% of the portfolio is allocated to oil gas and consumable fuels, and the rest to equipment & services. In terms of country exposure, United Kingdom takes the largest share at 36.4% while Canada and France also get double-digit exposure at 27.8% and 12.2%, respectively. The product is down 12% year to date. The fund yields 4.14% annually.
iShares Global Energy ETF (IXC)
This ETF follows the S&P Global 1200 Energy Sector Index, giving investors exposure to the global energy space. The fund is relatively popular and liquid with AUM of $1.1 billion and average daily volume of more than 250,000 shares. Expense ratio came in at 0.48%.
The product holds 87 stocks in its basket. Oil, gas and consumable fuels sector dominates the fund's returns with 89% share while the U.S. firms make up for 59.03% of the portfolio. The fund has retreated nearly 11% in the year-to-date timeframe. The fund yields about 3.07% annually.
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